Leighton vows to cut costs in shake up

THE new head of construction giant Leighton has vowed to cut costs as part of a shake up of the company and its board, but shareholders have expressed concern about the recent changes.

Chief executive Marcelino Fernandez Verdes told Leighton's annual general meeting on Monday that management was conducting a complete review of the company in a bid to simplify its operations.

Mr Fernandez Verdes is also the head of Germany-based, Spanish-owned construction company Hochtief, which recently increased its stake in Leighton to almost 70 per cent and overhauled the company's board, leaving two independent members.

"What we want to do is simplify and streamline the business, ensuring that we have the most appropriate and efficient structure in place to deliver our services to our clients."

Those measures are likely to involve job cuts, although no clear plans for restructuring have been announced.

Mr Fernandez Verdes said Leighton still expects to make an underlying profit of between $540 million and $620 million in its 2014/15 fiscal year.

Leighton made an underlying profit of $584 million in 2013/14.

Chairman Robert Humphris, who announced his intention to retire this year, defended Leighton's reputation, which has been tarnished in the past year by allegations of corruption in its international business and two class actions.

The corruption allegations, reported to the Australian Federal Police two and a half years ago by Leighton, were of deep concern, even though they had been "sensationalised" in media reports, Mr Humphris said.

He said Leighton had about 53,000 employees and therefore would have issues in its business "from time to time".

Addressing shareholder concerns about the length of the investigation, Mr Humphris said the matter may never come to a conclusion.

"I will suggest that we will never know when they finish investigating because I think it's extremely unlikely that they will say to us, 'we've finished investigating'... they will just leave the file open in case something comes up in future so I'm afraid we've just got to get used to it."

Australian Shareholders Association spokesman Stephen Mayne expressed concern about remuneration for Mr Fernandez Verdes and other executives who also serve on the board of Hochtief, saying their pay should be "modest".

"Have we got a part-time CEO or a full-time CEO here and will the contract reflect the amount of time he's actually going to spend running Leighton versus running Hochtief?" Mr Mayne said.

He said shareholders were disappointed that departing CEO Hamish Tyrwhitt and deputy CEO Peter Gregg had been treated "ridiculously generously", receiving a combined $23 million in termination payouts.

Mr Humphris said Hochtief wanted to keep Leighton as an ASX-listed company and retain Australian equity in it to help the company win business in Australia.